The Right Price: Not a Market Proposal
To: Adam L. Penenberg
Re: The Right Price for Digital Music
The problem with your proposal is that the function linking price to demand is just as arbitrary as iTunes standard $0.99. Without a limited supply of product, there is no such thing as bidding in the naive sense you propose. [Note: I mean "naive" as a descriptive, not a hostile, term.]
The maximum revenue (&, with a marginal cost close to zero, profit) will occur if the industry gets everyone to pay exactly the maximum they are willing to pay in order to obtain a song. Coltrane pieces might well sell for much more than the latest pop single because the fans are devoted, and, probably, richer.
In the absence of a remote, billion-node mind-reading device, figuring the price is an art, not a science, and only crudely amenable to market methods. One possibility would be to make use of former Slate contributor James Surowiecki's 'Wisdom of Crowds' idea (well, he popularized it): create a market in which people place bets on how many copies of a song will sell at a given price point, and use that to set the price (via maximizing the function n*p, where p is the price point and n are the number of expected sales at that point.).
Re: The Right Price for Digital Music
The problem with your proposal is that the function linking price to demand is just as arbitrary as iTunes standard $0.99. Without a limited supply of product, there is no such thing as bidding in the naive sense you propose. [Note: I mean "naive" as a descriptive, not a hostile, term.]
The maximum revenue (&, with a marginal cost close to zero, profit) will occur if the industry gets everyone to pay exactly the maximum they are willing to pay in order to obtain a song. Coltrane pieces might well sell for much more than the latest pop single because the fans are devoted, and, probably, richer.
In the absence of a remote, billion-node mind-reading device, figuring the price is an art, not a science, and only crudely amenable to market methods. One possibility would be to make use of former Slate contributor James Surowiecki's 'Wisdom of Crowds' idea (well, he popularized it): create a market in which people place bets on how many copies of a song will sell at a given price point, and use that to set the price (via maximizing the function n*p, where p is the price point and n are the number of expected sales at that point.).
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